Resolute Mining Limited (ASX:RSG) shares rise on quarterly update: Is it a buy?

In morning trade the Resolute Mining Limited (ASX: RSG) share price has pushed higher following the release of the gold miner’s final quarter update for FY 2018. At the time of writing Resolute Mining’s shares are up over 1% to $1.32. What was in the update? According to this morning’s release, Resolute Mining produced 75,000 ounces of gold in the final quarter at an all-in sustaining cost (AISC) of $1,303/oz (US$986/oz). This strong finish to the year means that the gold miner produced 284,000 ounces of gold in FY 2018, just ahead of its revised guidance of 280,000 ounces. Pleasingly,…

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In morning trade the Resolute Mining Limited(ASX: RSG) share price has pushed higher following the release of the gold miner’s final quarter update for FY 2018.

At the time of writing Resolute Mining’s shares are up over 1% to $1.32.

What was in the update?

According to this morning’s release, Resolute Mining produced 75,000 ounces of gold in the final quarter at an all-in sustaining cost (AISC) of $1,303/oz (US$986/oz).

This strong finish to the year means that the gold miner produced 284,000 ounces of gold in FY 2018, just ahead of its revised guidance of 280,000 ounces.

Pleasingly, its AISC for FY 2018 came in slightly better than expected at $1,355/oz (US$1,051/oz), compared to guidance of $1,360/oz.

During the 12 months the company sold 262,381 ounces of the precious metal at an average price of $1,703/oz (US$1,320/oz).

This left Resolute Mining with cash, bullion and listed investments of $113 million at the end of the period, despite spending $112.5 million in development expenditures, principally for the Syama Underground mine.

But that looks like money well spent. According to its definitive feasibility study, the development is expected to deliver materially lower costs (Life of mine AISC of US$746/oz) and extend the mine life to 2032.

What about FY 2019?

In FY 2019 management has provided guidance of 300,000 ounces at an AISC of A$1,280/oz (US$960/oz). This will be a 5.6% increase in production and 5.5% reduction in costs.

While this is only a modest production increase year-on-year, further down the line Resolute’s production could rise significantly due to its development work.

Management expects the company to eventually become a 500,000 ounce per annum producer, while operating on even lower costs per ounce.

Should you invest?

As I’m not bullish on gold due to rising rates I wouldn’t invest at this stage, but if you’re positive on the precious metal then I think that Resolute Mining could be a good option ahead of industry peer Newcrest Mining Limited(ASX: NCM).

While Northern Star Resources Ltd(ASX: NST) would still be my first pick, Resolute wouldn’t be far behind given its lowering costs and sizeable future production increases.

Instead of the gold miners I would focus on these top mid cap shares with strong long-term growth prospects...

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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